Government’s plan to fix Eskom and end load shedding in South Africa

The Department of Public Works and Infrastructure (DPWI) has published a national infrastructure plan, focusing on the government’s major developments up until 2050.

A key focus of the plan is South Africa’s energy supply, with the government proposing a significant shift away from fossil fuels and load shedding within the next 30 years.

“Load shedding since 2014 has been caused by a combination of factors such as delayed commissioning, the underperformance of new-build coal generation capacity, and the degradation of the existing Eskom coal fleet, with energy availability factor declining from 94% in 2002 to 67% in 2019,” the DPWI said.

It added that until recently, Eskom’s form had not substantially altered.

“Policy indecision over the past two decades has significantly contributed to Eskom’s financial demise, with its pricing not historically in line with depreciation, constraining its ability to retain earnings for future investment.

“Eskom has declined from a world-leading utility to one that is financially insolvent, operating at very low levels of energy availability and struggling under a load of poorly designed and project managed new mega coal projects.”

The next three years

While much of the focus of the plan is focused on changes that will be implemented by 2050, a separate section focuses on the more immediate changes that government plans to make over the next three years.

These are detailed as followed:

  • Eskom will be restructured into three legally separated entities for generation, transmission and distribution. The Independent Transmission System and. Market Operator (ITSMO) will be established by 2021/2.  An energy planning Centre of Excellence will be established in 2022 and moved to the ITSMO by 2023.
  • The commitment to lift the licence limit to 100 MW self-generation will be implemented in 2021/22. There will be a central database of projects to enable effective planning, especially of transmission infrastructure.
  • The process of appointing NERSA councillors will be reviewed to ensure independence. An appeals process will be created to ensure accountability in regulatory decisions.
  • State-owned enterprise leadership capacity, starting with Eskom, at board and executive levels will be according to acceptable governance norms by 2022. There will be an approved plan to stabilise Eskom and a turnaround pathway to long-term viability and vibrancy.
  • The top 10 municipalities that deliver to large populations and that demonstrate significant challenges will have support and/or capacity to adequately maintain distribution systems and billing systems by 2023/24.
  • There will be a plan to reduce reliance on coal including a Just Transition by 2021/2 and meaningful implementation begins 2022/23.

More power 

The government said that it also plans to focus on the following Strategic Integrated Projects (SIPS) to help generate and stabilize energy supply:

  • Emergency power procurement of 4,000 MW in 2021/22.
  • Procurement of power from renewable Independent Power Producers (IPPs) of 3,200 MW in one bid window in 2021. Procurement of 10,000MW of renewable IPPs in one window in 2022.
  • 800 – 1,000 MWh battery storage procured by 2023/24, of which 513 MWh battery storage procured by 2022. The plan notes that substantially more is required, with targets to be determined in 2021 and added as SIPS.
  • Municipalities enabled to procure power from IPPs.
  • The target for embedded generation investment will be increased to 4,000 to 5,000 MW.
  • Acceleration of national plan for transmission infrastructure investment finalised and funded in 2021/2, with implementation beginning in 2021/2.

Not off to a good start 

While the national infrastructure plan offers a government blueprint to help stabilise South Africa’s energy supply, much will come down to implementation.

South Africa’s mineral resources and energy minister Gwede Mantashe, has still not published an amendment to the Electricity Regulation Act that will allow individuals and businesses to install up to 100MW of private power generation without a licence.

On 10 June 2021, president Cyril Ramaphosa announced that the threshold for licencing private power generation with the national energy regulator (Nersa) would be lifted from 1MW to 100MW.

The belated announcement follows sustained pleas from the private sector, including several business groups, that the threshold should be raised to 50MW.

Ramaphosa has gone further than this and raised the threshold to 100MW.

The cumbersome and costly licencing process for own generation is seen as a major deterrent to bringing much-needed additional generation capacity onto the national grid.

According to Ramaphosa, firms will also be allowed to sell any excess power generated back into the grid. However, it could take more than a year to see the effects of the change, says economists at the Bureau for Economic Research (BER).

Ramaphosa said that the final version of the amended schedule 2 would be published within “the next 60 days”. This means that the effective deadline was Tuesday (10 August).

Read: Explosion at Eskom power unit may push South Africa blackouts to record

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Government’s plan to fix Eskom and end load shedding in South Africa